Australia cut its forecast for its next wheat harvest,
cautioning over the El Nino weather pattern, and its potential for causing
eastern dryness which has already curtailed output of summer crops such as
cotton and sorghum.

Australia, the southern hemisphere's largest wheat exporter,
will produce 24.59m tonne of the grain in its harvest late in 2014, Abares, the
official crop bureau said, cutting its estimate from the 24.80m tonnes forecast in March.

The figure is well below the 27.01m tonnes produced last year,
despite a forecast of a 2% rise to 13.84m hectares in plantings, some 200,000
hectares more than initially expected.

Abares said that the idea of a rise in wheat seedings is "largely
because of expected favourable gross margins", a factor which has raised
expectations for sowings of canola too to 2.74m hectares, up 300,000 hectares
from the previous figure, meaning an increase area from last year.

'Critical to development'

The bureau said that while conditions for autumn plantings
had been "favourable" in most areas of Australia, there were "low levels of
soil moisture" in parts of New South Wales, the second-ranked wheat growing
state, and Queensland.

In Queensland, "rainfall in April and May was patchy, with
below-average rainfall in the southern and western regions and average rainfall
elsewhere", Abares said.

Further rains "will be critical to the development of winter
crops, particularly in areas where soil moisture levels are low".

"If sufficient and timely rainfall is not received yields
are likely to be reduced in these areas," Karen Schneider, Abares executive
director, said.

'Constrained by
rainfall'

Already, the dryness has left Australian farmers with lower
harvests of summer crops, such as sorghum, grown mainly in New South Wales and
Queensland, and of which output has halved to a 16-year low of 1.1m tonnes,
below the previous estimate of 1.28m tonnes.

The dry weather, besides prompting a cut plantings, spurred
a 25% yield drop too, with some New South Wales suffering an extra hit from
late rains.

"The quality of grain sorghum is below average on the
Liverpool Plains, where the grain size is small and there is shot and sprung
grain because of rain during harvest," Abares said.

In cotton, production was downgraded by 30,000 tonnes to
910,000 tonnes, despite a retreat in sowings largely to irrigated areas,
meaning the lack of rainfall in main eastern growing areas had essl effect.

Nonetheless, "growth in the average yield of marketable
cotton lint was constrained by rainfall in March 2014, particularly in the
cotton growing regions of New South Wales".

El Nino looms

And hopes of an improvement in weather conditions are being
undermined by the prospect of an El Nino pattern, which typically causes
dryness in parts of Australia.

"El Niño is often, but not always, associated with below-average
rainfall during the second half of the calendar year across large parts of
southern and inland eastern Australia," Abares said.

The weather phenomenon typically causes warmer temperatures
too, which "can exacerbate the effect of below-normal rainfall by increasing evaporation
and lead to lower soil moisture levels".

About two‐thirds of El Niño events since 1900 "have been associated
with drought over large areas of Australia", the bureau added.

Rains on their way?

However, shorter term, eastern Australia is poised for some
rainfall this week.

"Friday and Saturday look to provide the best chance for
rain, with a broad area from central Queensland through the Maranoa, Darling
Downs and right through the New South Wales cropping belt looking likely to get
at least 10mm-25mm, and up to 50mm in places," broker Pentag Nidera said.

"Whilst no-one is suggesting these forecast rains will deliver
anywhere near an ideal start [to the growing season] they will be an
improvement."